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China establishes foothold in Latin America

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Recently, China’s export volume has been decreasing in the wake of the Eurozone crisis and severe uncertainty in the US market. In order to compensate for the decline in growth, China has been searching for alternative markets to export to, as well as purchase natural resources. In addition to their neo-colonization of Africa, China has been rapidly increasing overall trade with Latin and Central America. The Asia Times reports on this shift in global trade:

China is Latin America’s third-largest trading partner, immediately after the United States and European Union (EU). Beijing’s commercial exchanges with Latin-American countries were worth more than US$241 billion in 2011, according to data released by the Chinese Trade Ministry in April.

In general, China is busily working to deepen ties with countries south of the US-Mexican border. In June, Beijing signed with Brasilia a currency swap deal worth $30 billion. The agreement is part of a broader attempt, along with the other BRICS (Russia, India and South Africa, to shield signatory countries from potential financial crises.

Moreover, while he was touring South America late last month, Chinese Premier Wen Jiabao outlined a proposal for a free-trade agreement (FTA) between China and Mercosur, the Southern Cone Common Market, which includes Brazil, Argentina, Uruguay and Paraguay (Venezuela is set to join the regional trade bloc as well). In the words of Wen, Beijing aims at redoubling overall trade with Mercosur up to $200 billion by 2016.

In spite of its significant economic gains in recent years, China’s fast-growing influence in Latin America may backfire, a situation it also faces in Africa. The main sticking point is the same: a trade imbalance, with China exporting almost exclusively manufactured goods towards the region in return for natural resources and raw materials.

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